Revenue Growth with Modest Profit Increase Amid Rising Gold Prices
Titan Company, a prominent player in the jewellery sector and a key investment for Rakesh Jhunjhunwala, is expected to report a solid performance for the fourth quarter of fiscal year 2025. According to estimates, Titan is likely to witness a revenue growth of 14.6% YoY, reaching ₹12,904 crore. This growth is primarily driven by a strong demand in the jewellery and other segments despite the adverse impact of soaring gold prices. The net profit for the quarter is expected to come in at ₹824 crore, marking a 7.1% increase from ₹786 crore in the same period last year.
Highlights:
Projected revenue of ₹12,904 crore, up 14.6% YoY.
Net profit expected to rise by 7.1%, reaching ₹824 crore.
Growth despite challenges posed by higher gold prices and intense competition.
Divergence in Analyst Estimates: A Mixed Bag for Titan’s Q4 Performance
There is notable divergence among analysts regarding Titan’s earnings performance in Q4. According to a consensus of brokerage estimates, the most optimistic projection predicts a 16.7% growth in net profit, while the most pessimistic view suggests a slight 2.2% decline in profits. This variance stems from differing views on demand impact due to the rapid increase in gold prices, which has affected consumer purchasing behavior.
Highlights:
Optimistic estimates predict 16.7% profit growth.
Pessimistic estimates foresee a 2.2% decline in profit.
Divergence highlights uncertainty amid price volatility and demand fluctuations.
Factors Impacting Earnings: Rising Gold Prices and Weaker Demand
One of the primary factors influencing Titan’s Q4 performance is the significant rise in gold prices. Since December, gold prices have surged by 15-20%, dampening demand for jewellery, particularly in the latter part of the quarter. Kotak Institutional Equities has forecast a 14% YoY growth in standalone jewellery sales, which is a sharp deceleration from the growth seen in the previous quarters (25.5% YoY in Q2 and Q3 FY25). This slowdown in demand has impacted Titan’s ability to meet its earlier expectations for growth in the jewellery division.
Highlights:
Gold prices up 15-20% since December, hurting demand.
Jewellery sales growth slows to 14% YoY, down from 25.5% in previous quarters.
Weaker-than-expected performance in the jewellery segment.
Margin Pressures and Increased Competition
Titan’s margins are expected to come under pressure due to multiple factors. The sharp increase in gold prices is likely to impact gross margins, while EBIT margins could be affected by a lower mix of studded jewellery, rationalization of gold rate mark-ups, and aggressive exchange offers aimed at attracting price-sensitive customers. Additionally, increased competition within the jewellery market has intensified the pressure on Titan’s margins. These factors are expected to weigh on the overall profitability for the quarter.
Highlights:
Gold price surge impacts gross margins.
EBIT margins expected to remain under pressure due to competitive pricing and promotional strategies.
Lower studded jewellery mix and higher operating costs contributing to margin squeeze.
Segment Performance: Watches and Eyewear Show Positive Growth
Despite challenges in the jewellery segment, other segments like watches and eyewear are expected to perform well. Motilal Oswal has forecasted double-digit growth in both the watches and eyewear divisions, with Kotak Institutional Equities expecting a 14% growth in the watches segment and a 17.5% growth in eyewear. This diversification in revenue streams helps buffer the pressures faced by the jewellery segment.
Highlights:
Double-digit growth expected in the watches and eyewear segments.
14% growth forecasted for watches, and 17.5% growth in eyewear.
Healthy diversification helping mitigate jewellery segment challenges.
Metrics to Watch: Purchase Trends and Gold Price Trends
As Titan’s quarterly results are released, analysts will closely monitor consumer purchase trends, particularly in the jewellery segment. The continuing rise in gold prices could further deter demand, and any indication of a slowdown in purchase trends could signal deeper challenges for the company in the coming quarters. Additionally, any future guidance on gold price trends and their impact on margins will be crucial for shaping investor sentiment.
Highlights:
Analysts to monitor purchase trends amid rising gold prices.
Key focus on how gold price fluctuations impact consumer demand.
Guidance on gold price outlook to be crucial for Titan’s forward strategy.
